Home prices unexpectedly dip

Home prices unexpectedly slipped in December but the annual rate of decline slowed, reinforcing the housing market's rocky road to recovery, Standard & Poor's/Case-Shiller indexes showed on Tuesday.

The S&P composite index of home prices in 20 metropolitan areas declined 0.2 percent in December, matching the dip in November, for a 3.1 percent annual drop.

A Reuters survey had forecast that prices would be unchanged for the month and down 3.2 percent annually following a 5.3 percent annual drop in November.

The S&P/Case-Shiller U.S. national home price index, which covers all nine census divisions, fell 2.5 percent in the fourth quarter from the same time a year earlier. This measure, like the 20-city and 10-city indexes, have seen smaller annual declines all through 2009.

The national price measure had been down 19 percent annually in the first quarter, 14.7 percent in the second quarter and 8.7 percent in the third quarter.

On a seasonally adjusted monthly basis, the 20-city index rose 0.3 percent in December, S&P said, matching the November increase.

Despite this steady improvement, much of it on the back of government incentive programs that will end this spring, prices in December reflected the hurdles still facing U.S. housing.

Unemployment hovers just under 10 percent, foreclosures are running at a record pace and banks still own a massive amount of repossessed properties yet to be placed on the market.

All could test prices anew.

Many of the secondary markets, which were away from the center of the initial problem, are starting to feel the effects of the crisis, said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

While affordability has improved, confidence about the outlook has not, so there's hesitancy to move on purchases, he said.

Fifteen of the 20 metro areas saw price declines in December compared with November.

Three of the markets, Charlotte, Seattle and Tampa, posted new low index levels as measured by the past four years, erasing any gains seen in the past few months, S&P said.